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“Sell Everything”… But Why: What Has The Smartest Investors So Spooked?

Many of the smartest investors out there hate stocks. Since May, we’ve heard negative equity calls from Stan Druckenmiller, George Soros, Carl Icahn, Jeff Gundlach and Bill Gross. Wall Street lore says “Never argue about markets with a guy who is much richer than you”. So we’ll take the discussion in a different direction: what do they know?

Successful investors are always more plugged in than the market as a whole – hence their success. And while we can only guess at the lynchpins of their negative take on stocks, we do have some idea of how significant they must be. For example, in 2016 the S&P 500 is up 5.9% on a price basis after1) the Brexit “Leave” vote, 2) dramatically disappointing Q1 and Q2 U.S. GDP, 3) a correction of 20% in oil prices, 4) a Fed that has incorrectly calibrated its public stance on monetary policy, 5) Donald Trump as the Republican candidate for president, and 6) the U.S. 10 Year Treasury at near record low yields.

None of that has been enough to spook U.S. equity markets. So whatever the big boys think they know, it must be really bad. But what is it, and why is it so hidden from view?

“Someone is getting this information before you.” If you’ve ever worked at a hedge fund, you know this is the worst thing you can hear. It means you are behind the curve, providing yesterday’s news into an investment process meant to predict the future. “Titanic sinks!” or “man lands on the moon!” are the more playful retorts you’ll get from co-workers. But it all means the same thing: up your game, or get a white box from the mail room.

So when a cluster of high-profile hedge fund and long-biased managers go out of their way to give dire warnings about the U.S. equity market with stocks sitting at or near all-time highs, any sensible investor needs to pay attention. These are people with access to information that most market participants could only dream of having. Former heads of state and central bankers, private intelligence operatives, senior government officials, the best consultants in any industry… It is like having an all access pass to anything, anywhere, any time.
Here’s a partial list of bold faced names that have panned stocks and other financial assets in recent weeks: